Private & Philanthropic: The Evolution Of China's Art Collectors

    If there's one major distinguishing factor that sets the art market in China apart from the rest of the world, it's the near impossibility of easy classification.
    The Yinchuan Art Museum will be the largest private museum in northeast China
    Jing DailyAuthor
      Published   in Finance

    Christie’s HK Sold US$352 Million Of Asian/Chinese Art, Wine, Jewelry At Spring Auctions#

    If there's one major distinguishing factor that sets the art market in China apart from the rest of the world, it's the near impossibility of easy classification. Over the past three years, as newly wealthy mainland Chinese have plowed into the auction market, buying up "portable assets" like jewelry, rare watches, art and antiques and fine wine, they've become a closely watched new demographic, whose buying habits have major implications for the industry as a whole. In segments like wine, the bidding and collecting trends of mainland Chinese "new collectors" has caused major price fluctuations on a global scale for particular wines. In 2010 and part of 2011, an auction rush on Château Lafite Rothschild among Chinese buyers caused prices to skyrocket in 2010 and part of 2011, then fall back to earth over the past year as these collectors diversified into other Bordeaux labels and other French regions like Burgundy.

    So too in the art market has Chinese demand become a key industry bellwether. Following a hugely successful spring auction season in 2011 and more muted, but comparatively strong fall season later that year, international auction houses like Sotheby's and Christie's, Bonhams and others recently held their spring auctions in Hong Kong. Offering wine, jewelry, contemporary and modern Asian art, Chinese ceramics and rare watches, buying at Sotheby's five-day auction series remained driven by the appetite of China’s emerging (and fast maturing) new collector. Unlike last fall’s lackluster Christie’s wine auction, when only 84 percent of the lots sold, Sotheby’s recorded 100 percent of lots sold over its two-day wine series, beating top estimates with a total of HK$63.6 million (US$8.2 million). In the contemporary art segment, despite being affected by Chinese buyer indifference towards lower-quality pieces or non-Chinese Asian art, 37 lots sold for over HK$1 million, with the auction pulling in a grand total of HK$211 million (US$27.2 million), the second highest total for a various-owner sale of contemporary Asian art.

    As in the case of Sotheby's, new Chinese collectors showed at other spring auctions in Hong Kong that they're learning quickly about what separates average works of art from exceptional works, becoming choosy in record time. Still, at its recent spring auction series in Hong Kong, Christie’s sold HK$2.7 billion ($351.7 million) worth of Asian and Chinese art, wine and jewelry, besting expectations and showing that demand for portable assets remains strong. As Jonathan Stone of Christie's told Reuters in the wake of the auction series, “It doesn’t seem so much that the general economic uncertainties in various places have had that much impact on the sales.”

    With rarer works of art and antiques becoming increasingly scarce, Chinese collectors are showing a discretion in their bidding not seen in early 2011, indicating that they're buying more for long-term investment than instant prestige. For certain artists in segments like modern, classical and contemporary Chinese art, the number of available, high-quality works is becoming smaller, causing per-piece prices to continue rising regardless of more particular bidding by collectors. As such, rarity is becoming one of the most important factors shaping the auction market for Chinese works, and will only becoming a more pressing force in the industry in the years ahead. At the same time, many new buyers are continuing to jump into the market not only out of an interest in art as an investment, becoming passionate collectors in their own right and gaining an appreciation for art.

    Though major auction houses in Hong Kong and in mainland China continue to record solid sales despite more choosy bidding among collectors, the market does show signs of growing pains, as auction houses deal with their success. For even the biggest collectors, conversion of currencies and strict 35 day payment periods have been a learning process. Many collectors purchasing now are learning to ask in advance for special terms, with payment extensions usually being "30/60/90," giving them up to three months to pay. (Though terms can be further lengthened for more expensive pieces.) While "deadbeat buyers" are a common occurrence at auctions around the world, the fact that the Asia-Pacific region has become so central to the global auction market since 2009 means it's causing serious headaches. As Francois Curiel, president of Christie's Asia, recently told CNN, "Up until 2008, Asia was 2 percent to 4 percent of group sales...Today, 25 percent of our buyers come from this region."

    Chinese collectors might be more particular than they were a year ago, but this isn't necessarily a bad thing for auction houses, particularly those in mainland China. As Jing Daily has previously noted, the mainland China auction market -- in which Christie's and Sotheby's cannot operate independently -- is the domain of home-grown players, which, despite their short history (both are less than 20 years old), now arguably dominate the market for Chinese art. As BusinessWorld put it this week, this "clutch of Chinese auction houses in Beijing including Poly International, China Guardian and Council have broken Sotheby’s and Christie’s once dominant share of the China art market."

    With scarcity becoming an issue in the Chinese art market -- particularly in terms of blue-chip contemporary artists -- new artists are being catapulted into higher price levels. We see this coming to the fore especially among home-grown Chinese auction houses, which are often championing Chinese artists not often seen at their international counterparts. The likes of Beijing Poly and China Guardian are becoming increasingly skilled at sourcing rarer lots that they know will sell for high prices to mainland Chinese collectors. By opening sourcing outposts in cities like New York and holding its recent 16-country buying tour, Beijing Poly has bought up many pieces of Chinese art and antiques that -- due to the narrative of being "taken out of China and returned home" -- often command very high prices at auction. Last weekend at its spring auctions in the Chinese capital, Beijing Poly sold a painting by the late artist Li Keran (李可染) for a record-setting 293.25 million yuan (US$46 million), drawing attention to the fact that Chinese collectors aren't just looking to Hong Kong, London, Paris and New York but also closer to home for quality works of art.

    As the BBC pointed out this January, the rise of domestic Chinese auction houses has been both remarkably fast and powerful, with China Guardian taking in US$606 million at its autumn auctions in Beijing last November, besting the $412 million made by Sotheby’s at its Hong Kong auctions in October as well as the $367 pulled in by Christie’s at its November Hong Kong auctions.

    Along with discriminating new collectors and a fast-growing domestic auction scene, one of the reasons China's art market has become so important is that it is, in many ways, fueled by a handful of "super-collectors" whose interests generally extend beyond buying for personal interest, speculation or even prestige among peers. Now, and in the months and years ahead, these super-collectors -- among them Shanghai-based billionaire investor Liu Yiqian and his wife Wang Wei, the Chinese-Indonesian farming tycoon Budi Tek, and Beijing-based Guan Yi -- are looking to display their auction prizes in lavish new private museums.

    This November, Liu and Wang will debut their "Long (Dragon) Art Museum" in Shanghai, a 10,000 square meter, multi-floor venue that will show off their extensive collection of "Red Classics" (artwork from 1949-1979), contemporary Chinese art, and antiques, as well as offer art education classes aimed at the city's nouveau riche. For his part, Budi Tek will open his "De Museum" in Shanghai next year in an old aircraft hanger by the World Expo site, displaying some of his massive collection of Chinese and Western artwork. Not to be left out, Guan Yi -- who already has a private gallery in Beijing -- plans to open his own private museum in the outskirts of the city in the next few years.

    Though it's one thing to build these museums, it's another thing altogether to run them efficiently. As Magnus Renfrew, director of ART HK, recently said, the key to a successful private museum is sustainability. “It’s many millions of dollars for construction or refurbishment, and that’s even before you’ve got to the art and before you get to the staffing and ongoing costs” Renfrew noted. “It’s not for the faint hearted.” But success in this field has been seen in recent years, specifically Guy Ullens's formula of starting, stopping and selling prized pieces from his personal collection of Chinese contemporary art. Now, the Ullens Center for Contemporary Art (UCCA), which Ullens founded in 2007, draws crowds with a global agenda and programming.

    One key thing about the boom in private museums in China is that many -- particularly those opened by property developers just looking to give their new developments a veneer of "high-brow" sophistication -- will fail because their owners are hoping to just make a quick buck, which most won't. As the Art Newspaper wrote last November:

    Most [private museums] begin as showcase architecture and vanity projects. Property developers have opened many to provide a varnish of high culture and to justify high prices, while others have been founded by enthusiastic members of the nouveau riche aiming to share their art collections. The practicalities of running a non-profit art space, and the inevitable legal, funding and personnel issues, come as surprises.

    Despite the challenges of building, stocking and operating the museums, navigating miles of government red tape, and attracting Chinese crowds -- who tend to be, on the whole, less knowledgeable about the arts than counterparts in, say, Paris or Tokyo -- it's unlikely that we'll see them disappear anytime soon. This is particularly true given that they have an important educational function, and that some of the more committed builders of these museums see themselves as modern-day Medicis, patrons of the arts working to better Chinese society in a cultural sense. As Budi Tek recently put it, “The action of opening the museum is an extension of love to society...When you see [New York’s Museum of Modern Art], with flocks of people everyday, I’m a little bit jealous.”

    Tek and other top collectors of Chinese art and antiques, several of whom are scouring auctions around the world for the best pieces, will possibly be the ones to make Western institutions jealous in the years ahead, however. Their tenacity in bidding for particular lots at auction and motivation in building and funding private museums to showcase their work, and (hopefully) cultivate a new generation of Chinese art lovers, will continue to shape the industry, breathing new life into what has rapidly become one of the most interesting places in the global art world.

    Discover more
    Daily BriefAnalysis, news, and insights delivered to your inbox.